Ordered to pay $1.6 million for negligence on sale of a West Coast dairy unit, PGG Wrightson Real Estate had damages reduced to $300,000 on appeal. While PGG did negligently provide purchaser Phil Routhan with incorrect milk production figures, it was not liable for all losses incurred following the purchase, ruled the Court of Appeal.
In 2010, Mr Routhan purchased a 105 hectare dairy unit near Hokitika. He had a high national profile in plumbing and gasfitting. Farming had been a long-held dream.
The $2.8 million purchase was funded almost entirely with debt finance. Ten years later, the farm was sold at Rabobank’s insistence for $1.5 million in a forced sale. Farm-gate milk prices had halved in the five years following his purchase, never returning to 2010 levels by time of the forced sale.
Mr Routhan sued PGG Wrightson, claiming he never would have gone ahead with his 2010 purchase if made aware of the dairy unit’s actual milk production levels. A PGC Wrightson agent had negligently overstated production levels at time of the sale by about ten per cent.
The Court of Appeal said PGG Wrightson acting as agent on the sale did not underwrite all financial consequences of Mr Routhan’s purchase. PGG did not advise him on whether to purchase the dairy unit, it merely provided him with information to assess a price at which he might offer to buy. PGG Wrightson was liable for the direct consequences of providing incorrect production figures. Overstating milk production by ten per cent resulted in Mr Routhan overpaying $300,000 for the farm, the Court ruled.
PGG Wrightson was not liable for post-sale events which resulted in losses suffered by Mr Routhan such as: market movements (the drop in farm-gate milk prices); and Mr Routhan’s spending on capital improvements, part of his strategy to boost production (building a concrete feed pad, upgrading races, re-fencing and replacing the water supply system).
PGG Wrightson Real Estate Ltd v. Routhan – Court of Appeal (24.04.23)
23.056